Finance Bill, 1994: Report Stage.

Amendment No. 1 is in the names of Deputies Yates and Rabbitte. I observe that amendment No. 2 is related. Therefore, I suggest that we discuss amendments Nos. 1 and 2 together if that is satisfactory. Agreed.

I move amendment No. 1:

In page 12, between lines 23 and 24, to insert the following:

"(ii) by the substitution in subsection (2) (inserted by the Finance Act, 1989), of ‘£10,0000' and ‘£5,000', respectively, for ‘£7,200' and ‘£3,600' (inserted by the Finance Act, 1993), and".

I have two general comments to make. First, last week the Select Committee on Finance and General Affairs sat four days to discuss the Committee Stage of this Bill. While Standing Orders, the workings of that committee and the debate on different Chapters of the Bill facilitated a detailed analysis and some significant changes to the Bill — I welcome some of the Minister's amendments tabled on Report Stage — I was appalled that the media, almost en masse ignored the debate on the most significant Bill being processed which involves a huge amount of work. I saw at least 60 Department of Finance officials in attendance. I have no officials to help me, neither do my colleagues on the Opposition benches. The amount of work put into this Bill is quite extraordinary. I am not complaining about lack of publicity or four minute sound bites or statements on this very detailed work. Next year, perhaps, we might examine the possibility of Committee Stage of the Finance Bill being taken in this Chamber, under the same Standing Order, so that the debate might get some media coverage. There are 212 amendments to be disposed of today in five hours. Therefore, I shall be brief in my comments on each.

Amendments Nos. 1 and 2 deal with the issue of exemption limits with regard to income tax liability, that is in respect of people on low pay, which is a very successful way of targeting tax relief at the low paid. The Minister effected no changes in exemption limits other than for children and, therefore, failed to meet a very pressing need. As was said on Committee Stage, the annual practice was for the Minister in his Budget Statement to say that so many people were taken out of the income tax net. The Minister has departed from that practice and in failing to increase the exemption limits, he has brought people back into the income tax net. It is clear that poverty and unemployment traps can be rectified, not by the very expensive increase in all personal allowances but through targeting them at the low paid.

The case we made on Committee Stage for the elderly has been ignored and my amendment No. 2 deals with this issue. People who have worked all their lives and are in receipt of contributory old age pension from the Department of Social Welfare may also be in receipt of a small superannuation pension, perhaps from a local authority, a company like Irish Life or other former employer. That is subject to tax. Those people are entitled to some additional relief. I regret the Minister turned down the suggestion that a single person in receipt of less then £100 per week should not have to pay income tax and that a married couple in receipt of less than £200 per week should not have to pay income tax. Last night when examining European income tax comparisons I found that the low paid in Ireland are throttled for tax unlike people residing elsewhere in Europe.

These amendments afford the Minister a last chance to mend his hand, ensuring that the low paid are not merely the subject of rhetorical propaganda but rather get real improvements in their standard of living. Will the Minister reconsider this issue and address it as he failed to do in the course of his Budget Statement?

Not only did we course this issue on Committee Stage at some length but I tabled an amendment similar to amendment No. 1 today for the last three Finance Bills because of my conviction that whatever money is there to alleviate the tax burden ought to be targeted at people on low incomes. We have been over the course to show that poverty in this society is not peculiar to people on social welfare benefits. People on low incomes, and there are a great many of them, are also caught in the poverty trap. The Government accepts that fact through instruments like the family income supplement because it is acknowledged that people on low incomes with a family find it impossible to make ends meet. The purpose of this amendment is to clearly state that it is disgraceful that a single person in receipt of just over £71 per week theoretically should become liable to income tax. Nobody could reasonably argue that a threshold of £100 per week — as stipulated in amendment No. 1 — before incurring liability to income tax is fair or reasonable.

Will the Minister remind the House of the cost of implementing this proposal? As was noted on Committee Stage, the Minister has abandoned the annual habit of telling us how many people are being taken out of the tax net as a result of changes he effects in the budget each year. He explained his reasons for so doing and more or less agreed that largely it was a meaningless exercise not relevant for very long because of changing circumstances and so on.

The fact that there are so many people on low incomes in a society within which the structure of the work-force is changing must be recognised. For example, the days of the 9 a.m. to 5 p.m. traditional style job have ended for very many people. There has been the proliferation of contract or casual work, part-time work, of shared work and so on which means there are a great many people who are on low incomes. Then there has been the proliferation of work in the services sector, some in the services sector are very well paid, while others, especially in the personal services area, are poorly paid. Many of the changes and-or improvements effected in the tax code over recent years have disproportionately benefited higher income earners. The focus needs to be on taking low income earners out of the net entirely and that is the purpose of this amendment. I ask the Minister to reconsider his position and to allow the word to go out from here that anybody earning less than £100 per week is not liable to income tax. That at least would make a major contribution to lifting many people out of the poverty trap.

I will try to keep my remarks brief, as requested by Deputy Yates. The purpose of amendment No. 1, which is a repeat of a Committee Stage amendment, is to increase the general exemption limits by £1,400 for widows and single persons and by £2,800 for married persons. The purpose of amendment No. 2 is to increase by £400 and £800 exemption limits related to persons aged 65 years and over. As I explained last week, section 1 already provides for an increase in the general exemption limits in the case of taxpayers with dependent children. The special child addition which operates in conjunction with exemption limits is increased by £100 per child from £350 to £450 for the first two dependent children and £550 to £650 for each dependent child thereafter. The child element of the exemption limits is intended to target relief at the group which is identified as in particular need of support — low income married couples with families. I have no difficulty with Deputy Rabbitte's statement that these are the families we should target.

In examining the rate of the exemption limit this year I also provided for a decrease from 48 per cent to 40 per cent of the tax rate applied where a taxpayer's income is above the appropriate exemption limit but is entitled to the marginal relief. Both these measures cost the Exchequer in excess of £10 million in 1994 and £20 million in a full year. Some 2,900 persons and about 6,000 persons with children will be exempted because of that measure. That measure brings 25,500 taxpayers with 36,000 children into marginal relief. As well as benefiting the 33,800 taxpayers who move into marginal relief, there are also benefits for over 100,000 existing marginal relief cases. These moves are directed at the group referred to by Deputy Rabbitte.

It is important to remember that the income tax treatment of the elderly is more favourable than for taxpayers generally. The exemption limits for pensioners are significantly higher than those which apply generally. Currently they stand at £4,100 for a single person and £8,200 for a married couple aged 65 and over. For those aged 75 years and over the exemption limit is £4,700 for a single person and £9,400 for a married couple. Pensioners who have incomes slightly about the exemption limits are also taxed at the marginal relief rate of 40 per cent. It is more beneficial to pensioners to be taxed under the normal tax system. The age allowance of up to £400 for a married couple is given in addition to the normal tax free allowance, ensuring that pensioners get preferential treatment under the tax system. While the age allowance has remained unchanged for a period it is important to consider that the overall taxation system, is better for everybody rather than examining one case in isolation.

Regarding the point made by Deputy Yates, I agree with the objective of trying to lift the burden of taxation. That is what everybody wants. We are often lectured about our allegedly miserable performance in the income tax area compared with our neighbours on the other side of the Irish Sea. It is not generally recognised that low income families get a much better deal than equivalent families in the United Kingdom. Even before the budget a married couple with four children could earn £9,000 before paying any income tax whatsoever. The threshold for tax purposes for this family has now risen to £9,400. The equivalent family in the United Kingdom would have been obliged to pay almost £800 in income tax in the year 1993-94. I am not sure what Deputy Yates read last night but it is not correct.

I will be brief. Let us put this debate in simple terms. The Minister is saying it is right that once a single person earns in excess of £72 per week they will have to start paying a marginal rate of tax of PRSI plus 27p in the pound — say, a total of 35p in the pound. I do not know whether the Minister visits the Border constituencies but apropos his point in relation to people being better off on this side of the Border than in the UK, many people who work in Derry, Sealink or in the British jurisdiction but reside in Ireland on a fairly full time basis, have to pay more tax when they get their PAYE balancing statement. The Minister's examples of individual cases who may be marginally better off disregards the fact that at the end of the day people pay more tax under the Irish system, leaving aside the fact that in Britain they have a three tier tax rate with a particularly low rate for the lower paid.

We will have to press this amendment because somebody on £80 per week should not pay income tax and a married couple on a single income of £145 per week should not pay income tax. That is not fair. This is affordable in this year's budget.

Amendment put.
Committee divided: Tá, 32; Níl, 58.

Allen, Bernard.Barrett, Seán.Boylan, Andrew.Bradford, Paul.Browne, John (Carlow-Kilkenny).Bruton, Richard.Carey, Donal.Connor, John.Cox, Pat.Crawford, Seymour.Creed, Michael.Currie, Austin.Deasy, Austin.Deenihan, Jimmy.De Rossa, Proinsias.Dukes, Alan M.

Durkan, Bernard J.Fitzgerald, Frances.Gilmore, Eamon.Harte, Paddy.Higgins, Jim.Hogan, Philip.Keogh, Helen.Lowry, Michael.McCormack, Pádraic.McDowell, Michael.McManus, Liz.O'Donnell, Liz.Owen, Nora.Quill, Máirín.Rabbitte, Pat.Yates, Ivan.

CLASS="CP">Níl

Ahern, Bertie.Ahern, Michael.Ahern, Noel.Andrews, David.Aylward, Liam.Bell, Michael.Bhamjee, Moosajee.Bree, Declan.Brennan, Matt.Broughan, Tommy.Byrne, Hugh.Coughlan, Mary.Dempsey, Noel.Doherty, Seán.Ellis, John.Fitzgerald, Brian.Fitzgerald, Eithne.Fitzgerald, Liam.Flood, Chris.Foley, Denis.Geoghegan-Quinn, Máire.Haughey, Seán.Higgins, Michael D.Jacob, Joe.Kenny, Seán.Killeen, Tony.Kirk, Séamus.Kitt, Michael P.Leonard, Jimmy.

Martin, Micheál.McDaid, James.McDowell, Derek.Moffatt, Tom.Morley, P.J.Moynihan, Donal.Moynihan-Cronin, Breeda.Mulvihill, John.Nolan, M.J.O'Donoghue, John.O'Hanlon, Rory.O'Keeffe, Batt.O'Leary, John.O'Rourke, Mary.O'Shea, Brian.O'Sullivan, Toddy.Power, Seán.Quinn, Ruairí.Ryan, Eoin.Ryan, John.Ryan, Seán.Shortall, Róisín.Smith, Brendan.Stagg, Emmet.Taylor, Mervyn.Wallace, Dan.Wallace, Mary.Walsh, Eamon.Woods, Michael.

CLASS="CP">Tellers: Tá, Deputies Boylan and McManus; Níl, Deputies Dempsey and B. Fitzgerald.